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On a value basis, RPL would have to be one of the most attractive prospects on the NZX. Even allowing for concerns regards history and management, it must be hard to ignore the intrinsic value in the China property assets and the strongly improved earnings forecast which will see RPL on a low P/E of around 5.4 based on current s.p. of 49cps.

 

Unfortunately, RPL has sufficient external takeover protection and management job protection built into its share register, so the only eventual floor to the share price in a case such as this becomes dividends - something RPL have yet to produce reliably. However, current forecasts suggest this could change over the next year or two - a situation which is likely to lead to a substantial re-rate.

 

While Mainzeal may see some flow on effect from sub-prime and potential reductions in property development, the biggest threat to RPL will likely be when China hits the inevitable speed bump at some stage. Then it will become apparent to what extent Richina Financial has resisted the temptation to take financial gambles.

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I, too, would not be surprised if the payment of regular dividends would cause a strong rerate of RPL. There is no doubt that management have been taking the right steps since Vector, and so it amazes me that the market hasn't responded in advance. I suspect, however, that this can be safely linked to the remoteness of RPL's Chinese operations to the participants in NZ, not to mention the difficulty invovled in a larger buyer taking a position without alerting the market and alone forcing a rerate. Confidence in the management hangs, IMO, on this year's results, especially in context of the Christmas letter.
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  • 4 weeks later...

Well the reported FY07 profit came in at $US16.7m - up 142%. Not a bad result, though helped along by being reported in US Toilet Paper. :P

 

Sadly, RPL is more likely to take years, not months, to regain the confidence of institutions. Otherwise, a P/E of 5 with forecast for further growth, property assets in China and low debt might attract some more interest. For now, it's 54cps (and at least has managed not to fall in line with the market over the past few months).

 

Will be interested to establish the quality of this result when the full financials are available. Op cashflow of $11m and pay down of debt by $12.5m is a good sign. Shareholders equity now up over $NZ1 per share.

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Full financial statements now available here.

 

Looks solid enough. Some of the cashflow looks to have come from a decrease in working capital. A further $8m of forex gains booked straight to equity - will have been more over past 2 months with CNY being steadily allowed to move up. The minority interest of the tracking security was included in the published equity figure yesterday. Removing that NTA for shareholders is actually NZ 84cps at current exchange rates.

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Share price remains soft despite the strong result. Phaedrus has pointed out one reason (on another channel) as being trading of the range. I would suggest something different - FIF regime related selling. RPL share price is one of the few shares potentially affected by this due to being an FIF company with a high proportion of NZ shareholder base. Also being illiquid.

 

The effect of selling was strong last year, with the price sold down from 15 January until 29 March on no negative news. This year, the effect could be expected to be lower as the reasons for selling will be less strong. Last year, many would have been selling simply to reduce the value of holdings eligible for FDR. Those that bought back in during the year can not then sell again without triggering the quick sale rule. However, if they have already made quick sale losses, then, (if I am correct in believing quick sale gains and losses are pooled), quick sales of RPL shares can be made and the gains netted off against losses elsewhere. In addition, there may still be some small shareholders who choose to reduce their FIF holdings below the threshhold of $50,000 in any given tax year. Or simply those who are overweight in RPL and would therefore prefer to reduce their holdings prior to 1 April.

 

Might be wrong, but will be interesting to see if the price of RPL once again turns north from 1 April. Any overseas or small investors not subject to NZ FIF tax rules (e.g. those with

 

 

 

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  • 1 month later...

As it happened, most shareprices seemed to turn north from 1st April. RPL actually firmed a little in March and has been in a reasonable uptrend. So far, looking like a fairly steady trade from my 47-48cps purchases (currently 56cps).

 

Fairly happy with the annual report. As expected, RPL will focus more and more on wheeling and dealing in Chinese financial and property assets. Amalgamation of the leather operations and listing on the Shanghai stock exchange may have some upside, but I'd expect them to use it as an opportunity to reduce their holding there and apply cash to the financial side.

 

The rental side is interesting - seems many of their holdings pay minimal rent on long term leases with no ratchet clauses. Given the history and state of the property market, this means flow through of growth in market rentals in Shanghai is delayed and also means some properties being left partially empty until all tenants can be vacated for refurbishment. Short term cost, but long term should book some substantial gains in rental and consequent valuations.

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  • 3 months later...

So the dividend declared with full year results has now been cancelled. Not surprising, given no dates ever appeared, despite the original statement that it would be paid "before the AGM".

 

Sadly, it seems RPL have chosen to put a bomb under any credibility they might have been able to generate from last years impressive profit result. Credibility was the one thing they were desperately in need of after years of seemingly random performance. Cancelling the dividend MAY make sound financial sense, but for a company with their record it just looks desperate. In addition, the fact they made this decision just the day before the AGM just looks like seat-of-the-pants management.

 

I would not be surprised if shareholders fell out of their seats in hilarity at the meeting as the company tried to point out their share price growth over 4.5 yrs (by reference to a low point in their existence - which may well be revisited post this meeting if anyone ever puts their hand up for more RPL shares again...).

Waving the restructuring plans in the air probably generated another round of mirth.

 

The interesting thing is that the company hints at needing cash for another acquisition. It begs the question, that if they want more funds, why do they appear to deliberately and callously pursue actions which are detrimental to their share price? The cynic in me wonders if that suits the purposes of REHL holders who have indicated in the past that they'd like a bigger stake.

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  • 2 months later...

And the RPL share price continues to slide...

 

Less of a risk that this company will completely self-destruct - simply more likely that it will slide cheaply into the waiting hands of REHL who can then attempt to vigorously extract the underlying asset value from it.

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  • 2 weeks later...

The September RBNZ Bulletin made mention of the amount of hot money flowing into Chinese banks in anticipation of a revaluation of the Renimbi. Ultimately, this adjustment has to happen. Maybe not great for the tanning business, but should boost the value of Chinese property and rentals relative to the NZ dollar.

 

I don't trust RPL management particularly, but I still hold a few RPL on the basis that it is the easiest exposure to the China on the NZX - my only other exposure is via "Henderson TR Pacific Investment Fund" (HRP) and I've never been a big fan of funds either.

 

RPL's NTA per share has grown while its share price has shrunk. It wouldn't pay to count on a re-rate, but if it ever gains a whiff of investor confidence, the share price could have a long way to run up. A gamble but probably with better odds than a Macau casino at current levels of 24/25cps?

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  • 1 month later...

That is a rather complicated announcement out of RPL today - it may take the full documentation before I am completely clear on what they are proposing. At first glance, it appears like amalgamation with REHL followed by separation of the stock into four types (letter stocks?) which trade independently and will pre-sequence the eventual splitting of RPL itself.

 

Interestingly, the company is offering to purchase shares from holders not wishing to participate in the new scheme at a price of 45.47cps - a substantial premium over the recent price of 21cps. In addition, holders seem to retain a "put" option to sell the shares back to the company on any of the dates 30 Jan 2009, 30 June 2009 or 31 Dec 2009 - it's not clear whether this is at the same price, but, if so, this should put a floor under the price for some time.

 

Apart from the inconvenience of having possibly small parcels of each type of share, this appears at first glance to be quite positive for despondent shareholders in RPL.

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